WorldCity Business Magazine

Trade overrides threats

by Claudio Mendonca

A DHL Connections panel maintains that the brouhaha over U.S.-Venezuelan relations is more talk than action.

Ongoing political and diplomatic skirmishes between the United States and Venezuela are not worrying local specialists, although a U.S. military officer says weakened diplomatic relations could lead to other problems.

Jerry Haar, the associate director of the Knight Ridder Center for Excellence in Management at Florida International University, said trade interdependency will prevent the two countries from pushing their differences too far.

”[South Florida’s] trade with Venezuela is up $1 billion from the previous year. Economically, both the United States and Venezuela need each other,” said Haar, who is also a professor of international business at FIU. “When it comes to petroleum, the U.S. is one of Venezuela’s major export markets.”

Frank Holder, the president of Ferrell Schultz Investigations & Security in Miami, and another panelist at WorldCity’s “Global Economic Outlook for 2006” event in late January, told the crowd that he agreed with Haar. “We have to look at what people do and what not at what they say,” Holder said, referring to Venezuelan President Hugo Chvez.

That trade between the two nations is growing. The United States imports some $30 billion in products from the OPEC country annually, most of it crude oil and other petroleum products. And while the overall trade imbalance favors the South American country, Miami has done a booming export business with Venezuela shipping it an additional$742 billion in goods in 2005, compared to 2004.

From a military standpoint, Holder said Venezuela poses no threat to the United States because it is “not even on the Pentagon’s radar screen.” But U.S. Air Force Major General Richard Mentemeyer, the deputy commander of the United States Southern Command, had a more cautious view.

Mentemeyer said there is always a danger that diplomatic problems could lead to deterioration in military relations. “Venezuela is a concern from a military perspective,” he explained. “In these cases we ask ourselves: How do we dialogue? How much interface can we do?’”

Still, Mentemeyer said the biggest concerns overall in Latin America were not military, but what he characterized as “areas that are ungoverned.” He was referring to drug trafficking, gang activity and other enterprises that operate outside the law.

“Our goal is to help our partner nations get control of ungoverned areas in Colombia and Central America where illicit activity is taking place,” the major general said. “We still have major challenges. It is important to have an open dialogue with militaries and police forces around South America to avoid bad trends before they get out of hand. Our focus is to work with partner nations.

**“We want to develop good relationships with them,” said Mentemeyer. “It is extremely important to dialogue with all countries.”

During the monthly DHL Connections breakfast briefing organized by WorldCity, Mentemeyer, Holder and Haar also discussed current trends in Latin America.

Haar was especially bullish on Colombia, a nation that he said has attaining high levels of productivity. The Colombian government estimates that the economy will grow about 5 percent in 2006, repeating the performance of 2005.

“Money is coming back to Colombia,” Haar said. “President Alvaro Uribe sold $1.2 billion in euro- and U.S. dollar-denominated bonds and the response in both the United States and Europe was extremely encouraging.”

Holder, the former president of the South American unit of global risk consulting company Kroll, predicted that the region will see strong economic growth in 2006. However, he said that will be tempered slightly by a slowdown in the frantic pace of sales to China from Brazil and Argentina. Both countries are supplying the Chinese nation with commodities, including iron ore and soybeans in massive volumes.

Long term, Holder expressed pessimism about the region’s future. He predicted that Mexico, Brazil and Chile would shed manufacturing jobs.

“If you go as far back as the 1960s, poverty, insecurity and corruption have been the same three issues and main problems in Latin America,” said Holder. “The widening of the gap between the rich and poor that has not changed.”

He said the region is also plagued by insecurity and increasing levels of unmanageable poverty.”

Holder said nations like Poland and South Korea receive greater volumes of investment funds than Latin America because they don’t have the problems that permeate the region.

“Companies in Latin America spend a large chunk of their budgets on security,” said Holder. “Even companies in South America are moving out.”